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1 <br /> ORANGE COUNTY <br /> BOARD OF COMMISSIONERS <br /> ACTION AGENDA ITEM ABSTRACT <br /> Meeting Date: February 3, 2026 <br /> Action Agenda <br /> Item No. 6-b <br /> SUBJECT: Update to Interlocal Agreements between County and Towns on Tax Collection <br /> DEPARTMENT: Tax Administration <br /> ATTACHMENT(S): INFORMATION CONTACT: <br /> Current Interlocal Agreement and Nancy Freeman, 919-245-2735 <br /> Addendum with Chapel Hill, Carrboro <br /> and Hillsborough <br /> PowerPoint Presentation <br /> PURPOSE: To: <br /> 1) Receive information on the current interlocal agreement (ILA) between Orange County, <br /> Chapel Hill, Carrboro and Hillsborough for municipal tax collection charges and the <br /> potential need for an update to the agreement; <br /> 2) Consider authorizing the Tax Administrator and Budget Director to begin discussions with <br /> Chapel Hill, Carrboro and Hillsborough on the current ILA and potential actions to meet the <br /> County's costs related to billing and collecting taxes for the municipalities; and <br /> 3) Consider authorizing the Tax Administrator and Budget Director to initiate discussions with <br /> the cities of Durham and Mebane based on pending expiration of those respective tax <br /> collections agreements. <br /> BACKGROUND: In 1979 the County entered into an agreement with Chapel Hill, Carrboro, and <br /> Hillsborough whereby the Orange County Tax Collector would, on behalf of the Towns, bill and <br /> collect their tax levies in accordance with North Carolina General Statute 160A-461. <br /> In 2006 the agreement was updated, and the municipal tax collection rate was set at 0.5% of the <br /> annual amount collected for each of the towns. The expiration was set not to exceed 99 years <br /> from July 1, 2006. The agreement requires unanimous agreement from all three towns to make <br /> amendments and requires a one-year notice for termination. <br /> In 2009, an addendum was approved by all parties that, in addition to the 0.5% tax collection rate, <br /> updated the agreement to add an agreed-upon annual surcharge for new software installed for <br /> the purpose of tax ownership, billing, and collection. However, the annual surcharge addendum <br /> has not been utilized to supplement revenue for the County. <br /> Research by Tax Office staff indicates that the current 0.5% municipal tax collection rate is below <br /> the state average and does not sufficiently sustain the costs incurred by the County to bill and <br /> collect municipal taxes, including software costs. <br />